Tag withholding tax

Federal  Board of Revenue (FBR) has recently updated the Withholding tax rates on any vehicle registration and for transfer of vehicles for the year 2020-21 from 30th of june, 2020.

Withholding tax under Section 231B:

The withholding tax rate under  section 231B for private vehicles is that withholding tax shall be collected by vehicle registration authority when purchasing newly manufactured vehicle at that time when vehicle is transferred to the person  who is purchasing the vehicle.

For the person not appearing on Active Taxpayer  List (ATL) , the withholding tax shall be increased to 100% for that person.

Here is the list of Withholding tax rates under the Section 231B:

Engine Capacity	For ATL	For Non-ATL
Up to 850CC	Rs7,500	Rs15,000
851CC to 1000CC	Rs15,000	Rs30,000
1001CC to 1300CC	Rs25,000	Rs50,000
1301CC to 1600CC	Rs50,000	Rs100,000
1601CC to 1800CC	Rs75,000	Rs150,000
1801CC to 2000CC	Rs100,000	Rs200,000
2001CC to 2500CC	Rs150,000	Rs300,000
2501CC to 3000CC	Rs200,000	Rs400,000
Above 3000CC	Rs250,000	Rs500,000

Also Check: Vehicle Verification in Pakistan

Withholding tax rates under Section 231B (2):

According to Section 231B(2), Vehicle Registration Authority will collect withholding tax from the person who is transferring his ownership/registration when vehicle is being transferred.

The withholding tax rate under this section shall be as:

Engine Capacity	For ATL	For Non-ATL
Up to 850CC	Rs0	Rs0
851CC to 1000CC	Rs5,000	Rs10,000
1001CC to 1300CC	Rs7,500	Rs15,000
1301CC to 1600CC	Rs12,500	Rs25,000
1601CC to 1800CC	Rs18,750	Rs37,500
1801CC to 2000CC	Rs25,000	Rs50,000
2001CC to 2500CC	Rs37,500	Rs75,000
2501CC to 3000CC	Rs50,000	Rs100,000
Above 3000CC	Rs62,500	Rs125,000

Withholding tax rates under Section 231B (3):

When a person is purchasing vehicle, withholding tax shall be collected by manufacturer of vehicle at the time of sale of vehicle. Withholding tax shall be adjustable to tax liability.

Under Division VII, Part IV of First Schedule of the Income Tax Ordinance, 200, withholding tax rates are as:

Engine Capacity	For ATL	For Non-ATL
Up to 850CC	Rs7,500	Rs15,000
851CC to 1000CC	Rs15,000	Rs30,000
1001CC to 1300CC	Rs25,000	Rs50,000
1301CC to 1600CC	Rs50,000	Rs100,000
1601CC to 1800CC	Rs75,000	Rs150,000
1801CC to 2000CC	Rs100,000	Rs200,000
2001CC to 2500CC	Rs150,000	Rs300,000
2501CC to 3000CC	Rs200,000	Rs400,000
Above 3000CC	Rs250,000	Rs500,000

Property tax in Pakistan is a tax that is owned by an individual or another legal entity, such as a corporation. Property taxes are paid by the property owner calculated by the government on property value and location basis.

Before going into the changes in property tax for the year 2019-20, the government has done, we need to understand what kind of taxes apply in Pakistan.

Types of Tax:

Basically, there are four types of tax:
• Capital Gains Tax
• Capital Value Tax
• Stamp Duty
• Withholding tax

Concept Of Tax Year:

Basically, the tax year is 12 months but for different from the year that starts in January and ends in December. The tax year 2019 starts from 01 July 2018 to 30 June 2019. The tax year ends on June 30. The tax year 2020 begins on July 1, 2019, and ends on June 30, 2020.

Amount of Tax Needs to Pay While Selling A Property:

When you are selling property in Pakistan, you will need to pay capital gains tax on the profit.

Capital Gain tax:

This is the tax that the seller has to pay. When the seller makes a profit when selling the property, it is the same capital that is taxable. Capital gains tax is levied when the property is sold within three years of purchase.

For the first year, a 10% tax is paid, while in the second-year sales are taxed at 7.5% and in the third year at 5%. Profitable tax collection is calculated with reference to the appropriate market value. If the property has been held for more than three years, the seller will not pay capital gains tax.

Amount of Tax Needs to Pay While Buying A Property:

Different types of tax need to pay while purchasing a property in the year 2019-2020 are mentioned below:

Capital Value Tax:

A provincial tax paid by the buyer while buying a property is known as capital value tax. Capital value tax is payable on the value of the asset acquired. According to the Finance Act, 2006, capital value tax is levied at the rate of 2% of the recorded value.

According to the new budget 2019-2020, the federal government has supported the abolition of DC rates. Currently, the total capital value tax for the urban property is 2%.

Stamp Duty:

Stamp duty is a tax on a legal document when buying a property. Basically, stamp duty is levied at 3% of the property’s DC rates.

Withholding Tax (WHT):

Withholding tax is very important. This is the federal tax that buyers and sellers have to pay when dealing with property paid at the time of the property deal

Withholding Tax for Buyer:

An individual who is an income tax filer is buying a property that has to pay a 2% holding tax and non-filers have to pay 45% tax.

People who are buying property need to pay tax only if the value of the property is more than Rs 4 million.

Withholding Tax For Seller:

If the seller of the property is an income tax filer then he has to pay a 1% tax whereas non-filers have to pay 25% tax. This rule has been passed so that more people can file income tax every year.

Source: https://www.fbr.gov.pk/

Withholding tax is a requirement of government for the buyer of any service or item of income to withhold or the deduction of tax from the payment which is paid to the government.

Why Withholding Tax?

• Less interference with the tax authority
• Helps to expand the tax net
• Daily basis revenue generation
• Includes Tax Evasion
• Economics documents
• Maintaining flow with the least cost

Withholding Tax Trend:

Withholding tax (WHT) regime is a worldwide trend and the largest source of national revenue in Pakistan. The dependence on WHT has also been on the rise in recent years. Of the 740 (b) direct tax reserves for the financial year 2012, Rs.422 (b) with a share percentage of 57% was derived from different holding taxes.

Scores Of Withholding Tax:

WHT has been part of the tax system in one way or another since Government and taxpayers directly taxed the two scores.

• Provides regular revenue to the government for its expenses and operations throughout the year

• It provides taxpayers with an opportunity to meet their obligations in qualifying installments.

Directorate General of Withholding Tax:

Currently, globalization has forced many countries to adapt their economies to new trade and investment policies included in free trade agreements, tax policies, and alignment. Countries cannot close their borders or their economies. Tax policies are inseparable from international economies. Therefore, the Directorate General of Withholding Tax has been set up by the Finance Act 2008 under Section 230A of the Income Tax Ordinance 2001 to review and manage these holding tax systems while maintaining this competitive environment.

Also Read: What are the penalties of being non-filer?

Efficient Source Of Revenue:

WHT is an efficient source of revenue. Their share of direct tax revenue is about 41%. Rise of Rs.422(b) in 2012 as compared to Rs. 5(b) in 1991 talks about rapid growth and consequent heavy dependence on withholding tax.

According to the Income Tax Act, 1922 tax deduction was from two source salaries and interest on securities. Different provision of the tax law was introduced later to extend WHT net in the 1990s, by providing WHT on large-scale transactions.

The main withholding provisions are related to salaries, imports, exports, commissions and brokerage, dividends, contracts, loan interest, utilities, car taxes, stock exchange provisions, and non-residents, etc. with different rates.